Result of Korea-China FTA Negotiations on Agriculture and the Corresponding Plans (Part 1)

2014-12-30

(523)

Sung-Jae Chun

Public-Service Advocate of Korea

This article is a news release of the Ministry of Trade, Industry & Energy, Republic of Korea which was distributed on November 10, 2014. It mentions about reaching a consensus on FTA between Korea and China.

□ On November 10, 2014 (Monday), Presidents of Korea and China have declared the substantial settlement of Korea-China FTA during the summit conference in Beijing, China.

○ After the 14th official negotiations on Korea-China FTA during November 4, 2014 (Tuesday) to November 9 (Sunday), two countries have reached a final conclusion on all essential points including opening of goods and services market and Product Specific Rules (PSR).

□ During the summit conference on November 10, 2014 (Monday), Presidents of Korea and China have officially declared the substantial settlement of Korea-China FTA and ordered negotiation teams to finish the technicalities within this year. Ministers of Trade in both countries (Yoon Sang-jick of Korea and Gao Hucheng of China) signed ‘Korea-China FTA Agreement Minute’.

○ Discussions of formulating Korea-China FTA began in 2005 at the joint private research and since the first official negotiations on May 2012, the substantial settlement was achieved in 30 months.

- The technicalities are due to be finished as soon as possible and the initialation is planned to be done by the end of this year.

* 2005 ~ 2006 Joint private research à 2007 ~ 2010 Joint research by the industry, government and academia à 2010 ~ 2012 Prior consultation between the governments à May 2012 The first official negotiation of Korea-China FTA à 14 Official Negotiations

The following is an attached explanation on the press release written by the Ministry of Agriculture, Food and Rural Affairs, Republic of Korea, around the time of substantial settlement of Korea-China FTA.

I Progress of Korea-China FTA

□ Joint private research (2005 ~ 2006) and joint research by the industry, government and academia (2007 ~ May, 2010) between Korea and China were carried out.

□ Based on the Korea∙China Summit Conference on January 9, 2012, two countries agreed to proceed with the negotiations as soon as domestic procedures are taken care of.

□ After the declaration of the beginning of the negotiations, the first modality negotiation (outline of negotiation) began. Korea-China FTA Modality was settled on the 7th negotiation (September, 2013 in Weifang).

* Settlement of modality on goods, services/investments, other areas (cooperation on agricultural and fisheries products, SPS)

□ Second stage of negotiations began after the 8th negotiation. After six official negotiations, agreement on concession and rule of origin was reached.

□ (Sensitive list) Goods that are comparatively less sensitive such as lemon, margarine, etc will be subjected to a long-term tariff elimination schedule in order to prepare for sharp increase in imports

○ Other herbal medicine ingredients, other fruit nuts(prepared), other fruits (jam, jelly) are subjected to 20-year non-linear tariff elimination in order to minimize the influence.

* Other herbal medicine ingredients (tariff 8%) will apply tariff elimination after the 13th year, other fruit nuts (tariff 45 %) and other fruit (30%) will apply tariff elimination after the 11th year.

□ (Normal track) Low-rate tariff goods among fresh agricultural products, import-dependent goods such as raw materials of livestock feeds, goods that do not have domestic demand, etc will be subjected to tariff elimination within 10 years.

B. Concessions for major agricultural products

□ (Rice) Rice and rice-related products (16 tariff headings) are excluded from the subject of negotiations.

* All duties are excluded, including duties other than tariff elimination and any other FTA-related duties.

□ (Animal products) Major animal products in domestic market such as cows, pigs, chickens, ducks and other major animal products such as milk and egg are all excluded from the negotiation.

□ (Fruits) Major products that have large amount of supply and demand in domestic market such as Apple, pear, grapes, tangerines, persimmons, strawberries, watermelons, peaches, etc are excluded from the subjects of negotiation.

○ Oranges, which have high substitution effects on tangerines and major processed fruits such as grapes, peaches, strawberries, tomato juices are excluded from concession.

○ Nuts such as chestnut, walnuts, pine nuts, jujube, gingko nuts are excluded from concession. Goods that are in competition with imported agricultural products such as bananas are opened.

○ (Vegetable∙special production) Seasoning vegetable such as red pepper, garlic, onion, cinnamon, major field crop such as Chinese cabbage, carrot, radish, cucumber, aubergime and ginseng products are excluded from concession.

○ Major vegetable are entirely excluded from concession- regardless whether they are fresh vegetables or products that may be circumvented by being imported in forms such as frozen, dried, prepared, temporarily stored.

○ Among ginseng products, high rate tariff products (222.8% ~ 754.3%) are excluded from concession and only low rate tariff products such as drinks∙teas (8%) are agreed to be subjected to tariff elimination in 20 years.

○ Sesame have high dependency on imports and 24,000 tons will be imported every year under TRQ. Perilla is subjected to decrease the current tariff rate (40%) to 36% in five years.

□ (Highly Sensitive List) 102 Goods that are traditionally sensitive and were excluded from concession in previous FTAs such as rice, sugar, wheat flour, vegetable oil, cigarette and others are excluded from concession.

○ The other 1,029 goods (91%) are subjected to the elimination of tariff in order to maximize the possibility for venturing into the Chinese market.

□ (Sensitive List) Fresh meat such as beef, pork, chicken and others, as well as processed goods of fruits and vegetable, pasta, instant noodle and others will be subjected to tariff elimination in 20 years.

○ Kimchi and other vegetable prepared for storage, prepared coffee and others will be subjected to tariff elimination in 20 years.

□ (Normal Track) Frozen beef, pork, chicken, fresh apple, pear, grape and other fruits will be subjected to tariff elimination in 10 years.

○ Vegetables will be subjected to tariff elimination in 10 years, regardless of whether they are fresh or frozen.

□ Taking into consideration the worries from agricultural industry, Sanitary and Phytosanitary measures were agreed at the level of WTO/SPS Agreement.

○ Articles that may violate the quarantine sovereignty such as regionalization are deleted and the dispute resolution process in FTA will not be applied.

○ Both sides agreed that the SPS Committee will be established in order to perform WTO/SPS Agreement and to consult an agreement on SPS issues.

3. Non-Tariff Measures (NTM)

□ Two countries agreed to enhance clarity on non-Tariff Measures – excluding the matters of sanitation, SPS, Technical Barriers to Trade- and to provide opportunities for consultation.

○ Both sides agreed to open a working group on commission of commodity trade on NTM issues that one party has confirmed.

4. Country of origin

□ Fresh agricultural products (1~14 class) are subjected to strict criteria in order to protect the domestic market. Processed foods (15~24) are subjected to eased criteria, considering the possibilities for export.

○ For sausage, chocolate, instant coffee, fruit and vegetable products country of origin criteria is being eased to allow the foreign material usage in order to enhance competitiveness in exports.

III Domestic supplement plans

□ Korea-China FTA concludes the previous FTAs and signifies that the Korean agriculture is completely incorporated into the open market system in the FTA

○ Upon the agreement of Korea-China FTA, the percentage of agricultural product import from FTA countries increase from 64% (including the Commonwealth) to 80% (in 2013).

□ Considering the unique characteristic of the agricultural goods trading between Korea and China, the Government of Republic of Korea (“Government”) plans to establish a comprehensive plan in order to improve the fundamentals of the Korean agriculture and to raise it as future growth industry.

○ The Government have considered plans for reaction with farmers, local governments, professionals and others for possible scenarios while progressing with the negotiation.

○ The Government plans to analyze the effects based on the final negotiations and prepare measures to preserve damages, enhance competitiveness and utilize the opportunities for expanding exports to China.

Major contents for comprehensive plans (proposals)

* (Enhancing competitiveness for field crop) Maintenance of field basis, mechanization of field, ICT convergence

□ After the signing, ratification submitted to the National Assembly and the domestic supplements will be submitted simultaneously.

Analysis on the effect à First draft of countermeasures à Collection of opinions and consultation à Committee for supporting farmers à Domestic countermeasure projects committee on commercial treaties à Economic ministers meeting à Request for ratification of the National Assembly

○ (Analysis on the effect) Damages occurred by the result of the negotiation of goods will be analyzed.

- The announcement of the analysis will be held by joint research group after collecting and reviewing the data.

○ (First draft of countermeasures) First draft of domestic measures will be prepared based on the aforementioned data.

- Rural Development Administration, Korea Forest Service and local governments will establish and run a joint TF.

○ (Collection of opinions and consultation) Opinions of farmers, local governments, professionals will be collected and consultation will be made between the deparments.

- Various opinions of farmers, local governments and other interested parties will be collected by holding farmers association meeting(nationwide, association per goods), committee for national cohesion, general managers meeting on city and provincial government.

- First draft of countermeasures will be discussed in the Hope Agricultural Forum (희망 농업 포럼).

- Related departments will finalize the analysis on damages and consult on the investment and loan plans.

○ (Legal procedures) The plans for countermeasures will be introduced and discussed in committee for supporting farmers, Domestic countermeasure projects committee on commercial treaties and Economic ministers meeting

○ (Submission at the National Assembly) Ratification and domestic plans will be simultaneously submitted.